Exit strategy advice

[Blake Reynolds]

Hey all, 

Just curious to see if anyone can validate this exit strategy for a wholesale deal. First off this is purely an example and all of the numbers I use are just for illustrative purposes. 

So if I were to get a house under contract for let's say 50k and it rehabbed for 25k would this work? I get financing through a hard money lender and renovate the property up to rental quality and then rent it out. The ARV is now 100k. Could I get a traditional lender to finance the property at 70%LTV? If so would that be done without money down on the refinance?

So in essence I wouldn't  have to put any money into the deal considering the rental income would pay the hard money lender until it was refinanced. 

Is this something that can be done or is done commonly among buy and hold investors? My goal this year is to do one wholesale, one flip, and aquire one rental property. 

[Joe Villeneuve]

Originally posted by @Blake Reynolds:

Hey all, 

Just curious to see if anyone can validate this exit strategy for a wholesale deal. First off this is purely an example and all of the numbers I use are just for illustrative purposes. 

So if I were to get a house under contract for let's say 50k and it rehabbed for 25k would this work? I get financing through a hard money lender and renovate the property up to rental quality and then rent it out. The ARV is now 100k. Could I get a traditional lender to finance the property at 70%LTV? If so would that be done without money down on the refinance?

So in essence I wouldn't  have to put any money into the deal considering the rental income would pay the hard money lender until it was refinanced. 

Is this something that can be done or is done commonly among buy and hold investors? My goal this year is to do one wholesale, one flip, and aquire one rental property. 

 First, this strategy has nothing to do with wholesaling.

Second, the refi will cover everything at that point, and you wouldn't need to come up with any new cash at refi.

Third, I've never in my life seen enough cash flow from the rent to pay the monthly payments on any HML. Your goal should be to do as follows (Assuming you're using a HML to buy and rahab this property:

1 - Get pre-approved for your refinancing.  If you wait until after you have refinanced, and on the line for the HAML payments (and payback), and don't get approved, well....DON't DO THAT.

2 - Line up the HML, buy and rehab the property

2 - Be ready to refi ASAP, to get out of the HML. You should be able to refi without a tenant in place, although some lenders want to at least see a lease agreement ready to be executed.

3 - Pay off the HML, and cash flow the property.

You have to pre-qual for the refi to see if can get the money, and to see what the payments would be so you don't end up with a property that doesn't cash flow.